IBC: Eligible To Bid For Essar Steel, ArcelorMittal Tells NCLAT
ArcelorMittal today said it was eligible to bid for Essar Steel under the Insolvency and Bankruptcy Code as it was not a promoter of Uttam Galva and KSS Petron, and had already offloaded its shares before submission of the bids.
Arguing before the National Company Law Appellate Tribunal on behalf of ArcelorMittal, Senior Advocate Harish Salve submitted that its eligibility should be judged as on the date of submission of the resolution plan for Essar Steel.
"ArcelorMittal is not a shareholder in Uttam Galva as on Feb. 7 and on Feb. 9 it was not a shareholder of KSS Petron... We [ArcelorMittal] have submitted a bid on Feb. 12," said Salve.
He further contended that ArcelorMittal never had any management control in Uttam Galva. “ArcelorMittal never exercised any of the rights under the shareholders agreement, never appointed any directors to the board of Uttam Galva and never involved itself in the management and policy decisions of Uttam Galva,” Salve said.
Section 29A of IBC bars participation by promoters of delinquent companies in bidding for assets being auctioned.
Last month, National Company Law Tribunal had admitted the lenders' insolvency plea of against Uttam Value Steel Ltd, a listed subsidiary of Uttam Galva Steels Ltd.
ArcelorMittal had sold its entire shareholdings in Uttam Galva and KSS Global before submitting its resolution plan for Essar Steel.
Salve also submitted that in the rival bidder Numetal Ltd, VTB, a Russian bank has 40 percent shareholding. It is barred from trading in securities or accessing the securities market by regulators in the European Union and USA. "If the bank is gone then how would they survive," he said before the appellate tribunal.
On being asked by the two-member bench headed by NCLAT Chairman Justice SJ Mukhopadhaya as why the company submitted Rs 7,000 crore in escrow account, Salve said that ArcelorMittal was asked to do that by NCLT, Ahmedabad. “NCLT said if you pay then you are off the hook,” he said.
ArcelorMittal had offered to settle Uttam Galva's debt and had put Rs 7,000 crore in an escrow account.
The NCLAT on May 22 ordered status quo on insolvency of Essar Steel for two months as it admitted petitions of Numetal and ArcelorMittal over the bidding eligibility. Numetal and ArcelorMittal have filed petitions in the NCLAT challenging the disqualification of their first round of bids.
Both Numetal and ArcelorMittal put in bids in the second round after their offers in the first round were opined to be invalid. Numetal faced disqualification as its 25 percent stake was owned by Aurora Trust of Ruia family, the promoters of Essar Steel then while ArcelorMittal's first bid was rejected because of it holding shares in loan defaulting companies Uttam Galva Steel and KSS Petron.
For the second round of bid, VTB Bank sought to sever ties with the Ruia family by buying out Aurora Trusts stake in Numetal. ArcelorMittal transferred Rs 7,000 crore to an escrow account of SBI to clear outstanding loans of Uttam Galva and KSS Petron.
In the second round of bidding, Anil Agarwal's Vedanta Resources also joined the race. Also, JSW joined Numetal for the bid.